Board weighs how to pay for new middle school

Referendum would be on ballot in 2014 if it is needed.

Students head to class at Nitschmann Middle School. Bethlehem Area School… (KEVIN MINGORA, MORNING…)

September 17, 2012|By Steve Esack, Of The Morning Call

The Bethlehem Area School Board is considering whether to ask voters if they would approve a referendum to borrow $63.5 million to build a new middle school.

But whether the board takes that leap of faith in the electorate in 2014 may not be relevant.

Either way, a new Nitschmann Middle School would cost taxpayers — already shouldering $438 million in long-term principal and interest construction bonds — the same in tax increases and annual debt payments to cover a 20-year bond or a 30-year bond, records show.

Shearer, of Public Financial Management in Harrisburg, said legally the district has plenty of room to borrow under state regulations. But he cited a December 2011 Moody's credit rating report that said the "district's direct debt burden is high" and could drop if more debt is added.

But Shearer said the district should not let that fear deter their planning.

Resident Randy Toman said the board should consider using some of its $23 million in fund balance for the construction while housing some or all of Nitschmann students elsewhere for eight years. That way, the district can pay cash for the project and not add to the debt burden.

Director Gene McKeon responded by saying the board and administration worked hard to reverse the budget, which in 2007 was carrying a deficit. Toman started to reply while pointing his finger in emphasis.

"Stop pointing your finger," McKeon yelled.

Under state law, passed as part of Gov. Tom Corbett's 2011-12 state budget, school districts must seek voter approval for new construction debt if their operating budgets cannot sustain the costs.

Only one out of 13 referendums has passed in Pennsylvania.

Stacy Gober, assistant to the superintendent for finance and administration, said the ballot question could not be multiple choice or ask voters to approve one design over another. It can only ask a straight question on the dollar amount and square footage, she said.

Director Aurea Ortiz said a referendum should be skipped for the "greater good" because school board elections bring a low voter turnout.

There are funding options that could allow the board to borrow the money without voter approval, Gober said.

Under one scenario, a 20-year bond through 2035 would require a millage increase equal to $480,624 in 2014 and $4.9 million by 2018. A 30-year bond would cost taxpayers $1.1 million in 2015 and go up to $3.8 million in 2018. Two other funding plans had slightly different tax rates.

In all cases, the district would have banked enough tax money by 2018 to cover debt payments through the life of the bond.

The district's finances will improve once $4 million in new tax money rolls in on July 1, 2020, when the tax increment financing district, which covered the old Bethlehem Steel plant, comes back on the tax records, Gober said.

Burkhardt said the board should reconsider its previous denial of a tax increment financing zone at the Martin Tower site in west Bethlehem to try to pay for a new school building.

A majority of directors agreed to listen to the proposal again at a later date.